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The Case for Doing Nothing

With the stock market back in gloom-and-doom territory again today — most of the major indexes are in the red, with the Dow down nearly 400 points; indeed, the so-called fear index that measures volatility is one of the only gainers (up 28% at midday) — investors are once again lighting up their advisers’ phones, looking for answers. But many advisers are sticking with the advice they gave clients the last time the market started sliding, all of a week ago: Don’t panic, don’t make any big moves; in fact, don’t do anything.

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Advisers and market experts who recommended investors to stay put last Monday, when the Dow fell more than 600 points, looked pretty smart by the end of the week. Despite the Dow’s first-ever four-day streak of more than 400-point moves, the index ended the week down a measly 1.5%. “If you looked at the weekly results, you’d think it was just a normal week,” says Steven Roge, the portfolio manager with R.W. Roge & Company.

And so many advisers are sticking with that stay-the-course message today. “With this volatility, the natural inclination is that you have to do something about it,” says Judith Ward, a certified financial planner with T. Rowe Price. “But for many investors, we feel that not doing anything is the right action,” Ward says.

Investors with a well-balanced portfolio should remember that they’re not fully exposed to the market’s losses, advisers say. “We’re not into home-run hitting here,” says Tommy Williams, the president of Williams Financial Advisors. “I turned 59 this summer myself, and I realized I don’t have forever anymore. I think Americans, since 2008, have pulled their horns in and focused on preservation of capital.”

Some are even taking the hold-steady idea a bit further: “I have stopped trying to do any rebalancing while the market is so volatile,” says Roger Streit, a certified financial planner with Key Financial Solutions. “I’m not doing anything until September.”

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